Correlation Between Laramide Resources and ALX Uranium

Can any of the company-specific risk be diversified away by investing in both Laramide Resources and ALX Uranium at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Laramide Resources and ALX Uranium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Laramide Resources and ALX Uranium Corp, you can compare the effects of market volatilities on Laramide Resources and ALX Uranium and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Laramide Resources with a short position of ALX Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laramide Resources and ALX Uranium.

Diversification Opportunities for Laramide Resources and ALX Uranium

0.62

Correlation Coefficient

Laramide Resources  ALX Uranium

Poor diversification

The 3 months correlation between Laramide and ALX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Laramide Resources and ALX Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Uranium Corp and Laramide Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Laramide Resources are associated (or correlated) with ALX Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Uranium Corp has no effect on the direction of Laramide Resources i.e., Laramide Resources and ALX Uranium go up and down completely randomly.

Pair Corralation between Laramide Resources and ALX Uranium

Assuming the 90 days trading horizon Laramide Resources is expected to generate 2.74 times less return on investment than ALX Uranium. But when comparing it to its historical volatility, Laramide Resources is 2.52 times less risky than ALX Uranium. It trades about 0.04 of its potential returns per unit of risk. ALX Uranium Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.00  in ALX Uranium Corp on September 16, 2024 and sell it today you would lose (1.00) from holding ALX Uranium Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Laramide Resources  vs.  ALX Uranium Corp

Laramide Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laramide Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Laramide Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

ALX Uranium Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALX Uranium Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALX Uranium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laramide Resources and ALX Uranium

The main advantage of trading using opposite Laramide Resources and ALX Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laramide Resources position performs unexpectedly, ALX Uranium can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ALX Uranium will offset losses from the drop in ALX Uranium's long position.

The idea behind Laramide Resources and ALX Uranium Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.